Microsoft Said to Cut Windows Price 70% to Counter Rivals

Feb. 22 (Bloomberg) -- Microsoft Corp. is cutting the price
of Windows 8.1 by 70 percent for makers of low-cost computers
and tablets as they try to fend off cheaper rivals like Google
Inc.’s Chromebooks, people familiar with the program said.

Manufacturers will be charged $15 to license Windows 8.1
and preinstall it on devices that retail for less than $250,
instead of the usual fee of $50, said the people, who asked not
to be named because the details aren’t public. The discount will
apply to any products that meet the price limit, with no
restrictions on the size or type of device, the people said.

Stronger competition from Apple Inc. and Google cut revenue
last quarter at Microsoft’s devices and consumer licensing
division, which includes Windows software, as the computer
industry posted its biggest annual decline on record. By
offering incentives for PC makers to sell cheaper models,
Microsoft may be able to increase its share of the growing $80
billion tablet market and stave off Chromebooks, notebooks that
run Google’s operating system.

Microsoft, which named Satya Nadella as chief executive
officer earlier this month, is seeking to speed up development
and introduction of new devices. It won’t require products that
use the cheaper licensing to complete logo certification, a
process that verifies hardware compatibility, one of the people
said. Devices aren’t required to be touch-screen compatible,
they said.

Julia Kelly-Echeverio, a spokeswoman for Microsoft,
declined to comment yesterday.

Slower Adoption

Microsoft said earlier this month that it has sold more
than 200 million licenses of Windows 8 since the program went on
sale in October 2012, a slower rate of adoption than the
previous Windows 7.

While the regular Windows list price was $50, some of the
largest global computer makers paid closer to $30 after
incentives such as marketing funds provided by Microsoft, the
people said. Products that receive discounted license fees won’t
be eligible for such marketing support and incentives, one of
the people said.

Global computer shipments fell a record 10 percent last
year and are forecast to continue to decline this year as
tablets and smartphones lure consumers away from traditional
desktop and notebook designs, according to data from market
research firm IDC. Tablet sales volume -- dominated by Apple and
Google, whose operating systems account for 95 percent of that
market -- will climb an average 16 percent through to 2017.